Page 14 - Banking Finance May 2021

RBI CORNER

within 5 years from the date of RBI allows commercial regulatory compliance and is not
commencement of business. The net intended to pronounce upon the
worth of all SFBs currently in operation lenders to pay up to 50% validity of any transaction or
is in excess of Rs. 200 crore. of pre-COVID dividends agreement entered into by the bank

RBI has recently relaxed the dividend with its customers."
Customer privacy, data payout norms of commercial banks and SBI was penalised for "contravention of
protection are non- allowed them to pay up to 50% of provisions of section 10 (1) (b) (ii) of the
negotiable: RBI Deputy what they paid before COVID-19 from Banking Regulation Act, 1949 (the Act)
the profits for the fiscal ended on and specific directions of RBI issued to
Governor March 31, 2021. For FY20, the RBI had the bank on payment of remuneration
RBI Deputy Governor M. Rajeshwar asked banks not to make any dividend to employees in the form of
Rao has recently said that payment on equity shares from the commission", the statement read.
technological innovation in banking is profits in view of the ongoing stress and
of paramount importance but cannot heightened uncertainty on account of "This penalty has been imposed in
be pursued at the cost of customer COVID-19. exercise of powers vested in RBI under
privacy and data protection which are the provisions of section 47A (1) (c)
non-negotiable. RBI stated, "In partial modification of read with sections 46 (4) (i) and 51 (1)
the instructions, banks may pay of the Act," it further added.
Rao, while speaking at a webinar on
Open Banking organised by Tata dividend on equity shares from the
Consultancy Services in association profits for the financial year ended RBI deputy governor BP
with the Embassy of India in Brazil, March 31, 2021, subject to the Kanungo retires
said, "We must generate trust quantum of dividend being not more
amongst the customers that their data than 50% of the amount determined BP Kanungo has stepped down from
is safe and secure in all their financial as per the dividend payout ratio the post of deputy governor of RBI
relationships with regulated entities prescribed in paragraph 4 of the May after his term ended on April 2, 2021
and for that - innovation and 4, 2005 circular. Other instructions in cutting short all expectations of an
regulation should go hand-in-hand." the circular shall remain unchanged." extension of his tenure. As deputy
He also added, "All stakeholders need RBI also said that cooperative banks governor, he was in charge of the
to appreciate the fact that while are permitted to pay dividend on department of payment and
technological innovation is of equity shares from the profits of the settlement, currency management,
paramount importance, the customer foreign exchange among others.
financial year ended March 31, 2021,
privacy and data protection are non- as per the extant instructions. Kanungo's retirement comes at a time
negotiable".
However, all banks must continue to when the government is planning to
RBI Deputy Governor stated that "We meet the applicable minimum introduce the Cryptocurrency and
must generate trust" amongst the regulatory capital requirements after Regulation of Official Digital Currency
customers that their data is safe and dividend payment. Bill, 2021 in Parliament. RBI is also
secure in all their financial coming out with several regulations
relationships with regulated entities RBI slaps Rs. 2 crore penalty around fintech and payment.
and for that - innovation and
regulation should go hand-in-hand. on SBI for 'deficiencies in BP Kanungo, a career central banker,
Rao noted that in contrast to the open regulatory compliance' joined RBI in September, 1982. He
worked in several functional areas of
banking initiatives witnessed in some RBI has slapped a penalty of Rs. 2 crore
countries, India has embraced an on SBI over "deficiencies in regulatory the banks such as foreign exchange
approach where both the regulator compliance". management, banking & non-banking
and the market have collaborated for supervision, currency management,
the development of the open banking RBI, in a press release, said, "This government and bank accounts and
space. action is based on deficiencies in public debt. T

14 | 2021 | MAY | BANKING FINANCE